Qatar lifts North Field gas development moratorium, increasing LNG output

Main revenue earner. A general view of the North Field in Qatar. (AFP)

Beirut - Qatar Petroleum (QP) has lifted a 12-year morato­rium on the develop­ment of the world’s larg­est offshore gas field, its CEO Sa’ad Sherida al-Ka’abi said. The move will raise Qatar’s produc­tion capacity of liquefied natural gas (LNG) by 2 billion cubic feet daily in about ten years, when it is projected the transient soft Asian gas market would revive.

Qatar sources its gas mainly from the offshore North Field, which straddles Iran’s marine border. Nat­ural gas — mainly LNG — is the main revenue earner for Qatar. Qatar is the world’s largest LNG exporter. QP declared the moratorium in 2005, aiming to study the field’s perfor­mance to adopt appropriate policies for its development.

There was no deadline set for the moratorium and the government annually extended it. QP has one LNG development project in the North Field — the Barzan project, which was sanctioned prior to 2005 with an expected production of 1.4 billion cubic feet daily, intended mainly for the domestic market.

Consumption of natural gas is rising faster than any other hydro­carbon fuel globally. Gas is rapidly becoming the fuel of choice to gen­erate electricity, both because of its relative cost advantage over oil and because it is more environmentally friendly. Gas has also been replacing coal in power stations.

Sustainable sources of energy — solar and wind, as well as nuclear power — are competing with gas as the fuel of choice in Western in­dustrialised countries, particularly in Europe. Sustainable energy con­stitutes less than 10% of the global energy market and it is expected to be a long time before it constitutes a serious challenge to gas.

QP’s development project plans to boost capacity by about 2 billion cu­bic feet daily of raw gas and increase the country’s LNG production ca­pacity of 20 billion cubic feet daily by approximately 10%.

Production from the North Field’s wet gas will include condensates and LPG, important revenue earners for the country. The new production will be sourced from the southern area of the North Field not from the northern part near Iranian waters. Qatar expanded its LNG production capacity at the turn of the century. It was planned that much of the new production capacity would be des­tined for the US market but the ad­vent of US shale gas has obliged QP to find a new market.

Europe was also not a viable al­ternative at the time with European LNG demand down in 2009 due to the financial crisis. QP diverted sup­plies to Asian markets, particularly to Japan following the Fukushima nuclear disaster in March 2010. QP provided LNG to substitute the nu­clear feed to dual-fuel power plants there.

Meanwhile, new LNG capac­ity was being built in Australia and plans were under way to export US shale gas to global markets. Russia, the country with the world’s larg­est gas reserves started exporting gas through long-distance pipelines to China. The new supplies from Australia and the United States en­croached on QP’s market share, particularly in its traditional Asian markets.

LNG suppliers have experienced a period of soft prices for several reasons, including the 2004-06 oil price crisis that lowered gas prices from around $16-$18 per million British thermal units (Btu) to as low as $4-$5 per million Btu; more sup­pliers to the market; LNG markets are becoming more flexible with spot-term contracts replacing the traditional long-term deals of 20-25 years and due to demand from con­sumer countries for different price formulas.

QP has moved its surplus supplies to Japan after Fukushima and the increase in US shale gas production and is awaiting the recovery of pric­es and markets.